The Diwali Deficit

Click here to view a chart indicating the price changes of basic Diwali goods between 2012 and 2013.

Days before Diwali, Anand Kumar, a fruit shop owner in central Delhi, expects to be flustered. But the 42-year-old who works in Bengali Market says this year ahead of India’s biggest festival he’s harassed for all the wrong reasons.

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The fruit basket outside Mr. Anand’s shop in central Delhi.

“This is peak hour. There shouldn’t be space to set foot in this market. But look around. There is absolutely no buzz,” said Mr. Kumar, standing next to an assorted basket of fruits that he has prepared for sale ahead of Diwali, which crowns India’s season of festivals.

During the Hindu festival of lights, devotees worship Lakshmi, the goddess of wealth. Diwali is usually the time of year that shop owners and vendors await most eagerly as sales escalate and customers feel most confident about spending on themselves and others.

However, an informal market survey that India Real Time conducted in five of New Delhi’s retail markets in the week leading up to the festival, suggested otherwise.

Even if you stick to the basics and buy only the diyas (earthen clay lamps), mithai (traditional Indian sweets), dry fruits and nuts, fireworks, decorative lights and simple clay idols of gods and goddesses, you might need to shell out almost 25% more than you spent on the same things last year. A basket of these basic Diwali goods cost us 1,850 rupees (about $30). Traders said the price had gone up around 26% compared to 2012 meaning the same basic of products then would have cost around 1,470 rupees (or about $24.)

Arun Gupta, who owns Nathu’s Sweets, a New-Delhi based sweet shop with branches all across the country, said that amongst the wide array of treats on sale, dry fruits had seen the sharpest price inflation.

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A box of cashew barfi, roasted almonds and pistachios from Nathu’s Sweets.

For 250 grams of roasted almonds, for instance, Nathu’s Sweets last year asked customers for 150 rupees (about $3). This year though, the cost had risen by almost 43% to 215 rupees (about $4.)

India imports most of its dry fruits and nuts, particularly almonds, from countries such as the United States and Australia. The country’s imports have been hit since May by a sharp decline in the value of the rupee against the dollar because of fears that the U.S. would end its easy money policies.

This made imports more expensive as India had to find more rupees to buy the same amount in dollars. Traders bought less from abroad as a result, Mr. Gupta said.

The currency has regained somewhat since the U.S. Federal Reserve delayed the taper on easy money, but not enough or in time for many Diwali supplies, traders say.

According to a recent report by the U.S.- based Global Agriculture Information Network, India’s almond imports dropped by almost 11% in the year to July 2013.

Goods made in India too have suffered from high inflation.

Mr. Gupta said that although people were still buying sweets, an increase in the price of milk, an ingredient ubiquitous in most traditional Indian sweets, had pushed prices of these Diwali delicacies up too prompting shoppers to scale back.

“Someone who comes with the intention of buying a kilogram of say cashew barfi, looks at the price, and settles for 750 grams,” he added.

Aditi Malhotra/The Wall Street Journal

Kriti Creations at Delhi’s Khan Market on Tuesday.

Kriti Creations, a small gift shop in Delhi’s Khan Market, an upscale commercial shopping area, was chock-a-block with customers on Tuesday evening. But Mukesh Goyal, the owner, still seemed worried.

“Most of these people are only looking around. They’re hardly picking up anything to gift. All that their shopping bags have are the ABCs of Diwali,” he said.

He pointed out to one customer’s basket before she picked it up and headed to the cash register. Rangoli colors to decorate, different kinds of diyas and string of fairy lights, the basics to mark Diwali. Relatively abstemious.

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A customer’s basket at Kriti Creations in central Delhi.

A string of flowers made of cloth, which replicates the fresh flower marigold strings that Indians use to decorate their homes, said Mr. Goyal, sold well last year. This year, he says, it costs almost 80 rupees more.

“This too after we’ve subsidized the rate because of the popularity of this product,” he added. Mr. Goyal said that the most essential raw material in the string and the cloth flowers, is imported from China.

He also cited the strain on the Indian rupee, which traded at a record-low in August having fallen more than 20% against the dollar compared to the same point in 2012, as the main reason behind rising prices of even the most simple goods.

Aditi Malhotra/The Wall Street Journal

Strings made of artificial flowers hung outside Mr. Goyal’s store.

That 80 rupee increase in the cost of the flower string, was partly the result of import costs but also the increased cost of labor, he said. The flowers were assembled in Mumbai. “Everyone is feeling the pinch because of inflation. Even the cheapest labor is not so cheap anymore,” Mr. Goyal said.

In September, wholesale inflation — the most closely followed indicator of inflation in India — reached a seven-month high of 6.46%. In the first nine months of 2013, consumer inflation averaged 9.96%.

Rakesh Yadav, a member of the traders’ association at New Delhi-based Sadar Bazaar, the largest wholesale market in north India, said that the number of people flocking the market this year is as large as in 2012.

But he added that consumers are more conscious of price while purchasing this year.

“They’ll pick something up, contemplate, and finally conclude that the quality does not match the price,” said Mr. Goyal, who also runs a crockery store in the wholesale market. He said sales from his shop had dropped by about 30% this Diwali, compared to last.

Shop owners usually spike up prices a day or two before the festival when customers arrive to make last-minute purchases. But, this time, some say, they won’t be able to put up prices in this way, for fear of losing out on custom.

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Clay idols of gods and goddesses from Mr. Jena’s stall in south Delhi’s Sarojini Nagar.

“I want to hope that this is the lull before the storm, but it is highly unlikely,” says Suresh Jena, who puts up stalls selling clay idols of gods and goddesses in south Delhi’s Sarojini Nagar market every year.

Back in Khan Market, Mr. Goyal of Kriti Creations sets out what he believes is the most telling indicator of a disappointing Diwali.

“If you can find a slot to park in Khan Market, then Diwali certainly hasn’t arrived,” he said, pointing to the vacant parking spots in front of his store.

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